THIRD QUARTER 2020 EARNINGS - static.seekingalpha.com
Transcript of THIRD QUARTER 2020 EARNINGS - static.seekingalpha.com
3Q’20 Earnings Presentation
OCTOBER 28, 2020
THIRD QUARTER 2020 EARNINGS
3Q’20 Earnings Presentation
COMPANY UPDATE
3Q’20 Earnings Presentation 3
SAFE HARBORThis release and the documents incorporated by reference herein contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward- looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions. All statements, other than statements of historical facts, are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as "expects," "anticipates," "predicts," "projects," "intends," "plans," "believes," "seeks," "estimates," "continues," "endeavors," "strives," "may," variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our and our customers’ respective businesses and industries, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned these forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially and adversely from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, (i) the potential widespread and highly uncertain impact of public health outbreaks, epidemics and pandemics, such as the COVID-19 pandemic; (ii) loss of key customers; (iii) economic downturn, natural disaster or oversupply of data centers in the limited geographic areas that we serve; (iv) risks related to the development of our properties including, without limitation, obtaining applicable permits, power and connectivity and our ability to successfully lease those properties; (v) weakening in the fundamentals for data center real estate, including but not limited to, decreases in or slowed growth of global data, e-commerce and demand for outsourcing of data storage and cloud-based applications; (vi) loss of access to key third-party service providers and suppliers; (vii) risks of loss of power or cooling which may interrupt our services to our customers; (viii) inability to identify and complete acquisitions and operate acquired properties; (ix) our failure to obtain necessary outside financing on favorable terms, or at all; (x) restrictions in the instruments governing our indebtedness; (xi) risks related to environmental matters; (xii) unknown or contingent liabilities related to our acquisitions; (xiii) significant competition in our industry; (xiv) loss of key personnel; (xv) risks associated with real estate assets and the industry; (xvi) failure to maintain our status as a REIT (as defined below) or to comply with the highly technical and complex REIT provisions of the Internal Revenue Code of 1986, as amended; (xvii) REIT distribution requirements could adversely affect our ability to execute our business plan; (xviii) insufficient cash available for distribution to stockholders; (xix) future offerings of debt may adversely affect the market price of our common stock; (xx) increases in market interest rates will increase our borrowings costs and may drive potential investors to seek higher dividend yields and reduce demand for our common stock; (xxi) market price and volume of stock could be volatile; (xxii) risks related to regulatory changes impacting our customers and demand for colocation space in particular geographies; (xxiii) our international activities, including those conducted as a result of land acquisitions and with respect to leased land and buildings, are subject to special risks different from those faced by us in the United States; (xxiv) the significant uncertainty that remains about the future relationship between the United Kingdom and the European Union as a result of the United Kingdom’s withdrawal from the European Union; (xxv) expanded and widened price increases in certain selective materials for data center development capital expenditures due to international trade negotiations; (xxvi) a failure to comply with anti-corruption laws and regulations; (xxvii) legislative or other actions relating to taxes; (xxviii) the ongoing trade conflict and political tensions between the United States and the People’s Republic of China; and (xxix) other factors affecting the real estate and technology industries generally. More information on potential risks and uncertainties is available in our recent filings with the Securities and Exchange Commission (SEC), including CyrusOne’s Form 10-K report, Form 10-Q reports, and Form 8-K reports. We disclaim any obligation other than as required by law to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors or for new information, data or methods, future events or other changes.
3Q’20 Earnings Presentation 4
FINANCIAL / LEASING HIGHLIGHTS
Notes:1. Colocation square feet (CSF) represents gross square feet (GSF) at an operating facility that is currently leased or readily available for lease as colocation space, where customers locate their servers and other IT equipment.2. Annualized GAAP revenue is equal to monthly recurring rent, defined as average monthly contractual rent during the lease term plus the monthly impact of installation charges, multiplied by 12, excluding estimates for pass-
through power.
($MM)
Revenue $262.8 5%
Adjusted EBITDA $132.2 3%
Normalized FFO $114.4 10%
Normalized FFO per diluted share $0.96 5%
Key 3Q’20 Financial Metrics $82MM Revenue Backlog Positions Company Well for Continued Growth
3Q’20 Results
4 15K $11MM
MW Signed
CSF(1)
Signed
AnnualizedGAAP Revenue
Signed(2)
Leasing
Sep’20 Backlog Total Contract Value
$82MM $595MM
3Q’20 vs. 3Q’19
3Q’20 Earnings Presentation 5
DEVELOPMENT / FINANCING HIGHLIGHTS
Expansion of Footprint in U.S. and Europe to Support Growth Continue to Strengthen Balance Sheet
U.S. 45K 6
Europe - -
Total
Delivered 3Q’20
Notes:1. Represents CSF and MW at a facility for which development activities have commenced or are expected to commence in the next two quarters to prepare the space for its intended use. Estimates and timing subject to change. 2. Represents percentage of CSF under development that is contractually committed to customers as of September 30, 2020.3. Settlement of 2Q’20 and 3Q’20 sales required by May 2021 and September 2021, respectively. No portion of these forward sale agreements has been settled as of October 28, 2020. 4. Net debt is defined as long-term debt and finance lease liabilities, offset by cash and cash equivalents. It has been further adjusted to reflect the pro forma settlement of the forward sale agreements. See slide 23.5. Includes cash, cash equivalents and temporary cash investments on hand plus undrawn capacity on the revolving credit facility plus the pro forma impact of the net proceeds from the settlement of the forward sale agreements.
CSF MW
U.S. 163K 22
Europe 182K 56
Total
9/30/20 Pipeline(1) CSF MW
63%
CSF % Preleased(2)
5.1x $1.71BNet Debt / LQA
Adjusted EBITDA(4)Available
Liquidity(5)
ATM Equity
3Q’20 Forward Sales(3) ~3.0MM ~$219MM
2Q’20 Forward Sales(3) ~2.8MM ~$194MM
Available Forward Equity ~5.8MM ~$413MM
SharesEst. Net
Proceeds
33 ~100
Acres MW
Acquisition of land in London to support continued growth in leading European
data center market
Amount $400MM
Tenor 10 years
Maturity Nov’30
Coupon 2.150%
Smooths and extends debt
maturity schedule and increases percentage of fixed-rate debt
New Sr. Notes
45K 6
345K 78
3Q’20 Earnings Presentation 6
49%
14%
8%
8%
5%5%
3%3%5%
LEASING RESULTS
Notes:1. Based on September 2020 annualized rent. Annualized rent represents cash rent, including metered power reimbursements, for the month of September, multiplied by 12.2. 2Q’20 leasing results include exercise of previously disclosed (in 3Q’19) paid reservation for 4.5 MW and 30,000 CSF totaling approximately $5.5MM in annualized GAAP revenue.
High MRR / kW
Signed
Leasing Primarily Driven by
Enterprises
Balanced Revenue
Contribution from
Enterprises and
Hyperscale Companies(1)
3Q’20 Leasing Update / Contribution by Vertical YTD’20 Leasing Statistics(2)
53%47%
Annualized GAAP Revenue Signed
29%
71%
27%
73%
Significant contribution from European business and hyperscale companies
U.S. Europe IT - Cloud Enterprise > 500 kW ≤ 500 kW
$129$238
Prior 4-qtr avg 3Q'20
IT - Cloud
Financial Services
Other
IT - Enterprise/ Other
Energy
TelecomIndustrials
Healthcare IT - Mgd. Svcs.
69 454K $107MMMW
SignedCSF
SignedAnnualized GAAP Revenue Signed
$129 7.7 yrsMRR / kW
SignedCSF-Weighted
Avg. Lease Term
14%
86%
Enterprise IT - Cloud ≤ 500 kW > 500 kW
IT - Cloud / Enterprise Annualized GAAP Revenue Signed Deal Size
27%
73%
28New Logos
Signed
3Q’20 Earnings Presentation 7
Notes:1. Based on September 2020 annualized rent. Annualized rent represents cash rent, including metered power reimbursements, for the month of September, multiplied by 12.2. Excludes customer reimbursements for metered power, which vary from month to month based on factors such as our customers’ utilization of power and the suppliers’ pricing of power.
$12.7 $14.6
3Q'19 3Q'20
Revenue ($MM)
ESG Commitment
INTERCONNECTION / KEY METRICS / ESG COMMITMENTAdditional Key Portfolio Metrics
79%
% of 3Q’20Leases Signed with
Interconnection% of Rent withEscalation(1)(2)
78%
% of Rentfrom F1000
Customers(1)
76%
% of Rent fromCustomers in
Multiple Locations(1)
58 Months
Wtd. Avg. Rem. Lease
Term -Top 20
Customers(1)
90%
SDN-enabled elastic cloud interconnection provides on-ramp for multi-cloud solution
National & Metro IX
Dedicated network connections to cloud providers contributing to interconnection growth
Expansion of the ecosystem of carrier partners, enterprises, cloud companies, and network providers
3Q’20 Interconnection Summary
Pledge to operate carbon-free by 2040
Recently published initial sustainability report, with detail on energy and carbon, water, habitat, social responsibility, and corporate governance
3Q’20 Earnings Presentation 8
z
KEY ADDITIONS STRENGTHEN MANAGEMENT TEAM
John HatemChief Operating Officer
Katherine MotlaghChief Financial Officer
Brent BehrmanEVP of Sales
More than 20 years of data center industry experience, including eight with CyrusOne as EVP of Data Center Design and Construction
Developed and implemented design and construction improvements facilitating cost-
efficient, time-sensitive scale builds
Built data centers for large financial institutions, including JPMorgan Chase (formerly Bear
Stearns), Deutsche Bank, and Morgan Stanley
CFO of Europe, Africa and Latin America regions for five years at American Tower, a leading global
infrastructure REIT with operations in 18 countries
Customer Unit CFO at Ericsson and a Divisional CFO at Nokia
Held a variety of finance and accounting leadership roles at Nextel, AmerisourceBergen,
and Coopers & Lybrand
More than four years with CyrusOne; previously EVP of Solutions Engineering
SVP of Global Sales at Compass Datacenters for five years and Digital Realty for six years
Prior Sales leadership roles at Vettro, Entrust, and Nortel
John and Brent have more than 35 years of combined data center experience, are well-respected within the industry, and have strong relationships with our key customers
Katherine has significant CFO experience with international responsibility at one of the largest publicly traded REITs in the world and a background in communications infrastructure
Experienced senior management team with diversified technology and real estate backgrounds that has a proven track record of success
3Q’20 Earnings Presentation 9
FIRST 100+ DAYS / OBSERVATIONS
Bruce’s First 100+ Days as CEO of CyrusOne
Observations on Data Center Sector Trends
and CyrusOne
Strong secular demand trends expected to continue, supporting significant long-term growth opportunity
Significant opportunity in Europe as hyperscale companies expand in key markets
Valuation gap persists, with concerns about management turnover, U.S. leasing, consistency in execution and communication, and other factors
Attractive returns and access to capital create competitive environment in U.S.
CyrusOne’s established track record, broad geographic presence across key data center markets, and investment-grade status position company well
Met with and gathered input from key stakeholders (customers, employees, vendors, shareholders, and others)
Toured U.S. and European assets in key markets across the portfolio
Key additions to senior management team to best position company to create value for shareholders
3Q’20 Earnings Presentation 10
NEAR-TERM PRIORITIES
Near-Term Priorities for CyrusOne
Improve U.S. leasing share
Continue to grow European footprint to capitalize on strong demand trends
Senior management team to continue to collaborate on path forward
• Ensure available supply across key markets
• Target hyperscale yields in the 8-10% range, with higher yields for enterprise leases
• Key focus areas include capital allocation, mix of assets / markets across portfolio, optimization of funding sources, and cost control
• Expansion within major European markets to meet hyperscale demand
• 56 MW under development resulting in near-term footprint of 163 MW upon completion, representing 18% of total portfolio
1
2
3
Focus on priorities to close valuation gap over time, with articulation of clear goals and consistent communication and execution against these objectives (targeting Investor Day next year)
3Q’20 Earnings Presentation
THIRD QUARTER 2020 FINANCIAL REVIEW & REVISED 2020 GUIDANCE
3Q’20 Earnings Presentation 12
$127.8 $132.2
3Q'19 3Q'20
$103.9 $114.4
3Q'19 3Q'20
$250.9 $262.8
3Q'19 3Q'20
REVENUE, ADJUSTED EBITDA, NORMALIZED FFO, CHURN
0.8%2.1%
0.6% 1.0% 0.7% 1.0% 1.1%0.6%
4Q'1
8
1Q'1
9
2Q'1
9
3Q'1
9
4Q'1
9
1Q'2
0
2Q'2
0
3Q'2
0
Revenue ($MM)
Recurring Rent Quarterly Churn %(1)(2)
Revenue and Adjusted EBITDA growth driven by:
Expansion of customer base
7% increase in occupied CSF
Additional interconnection services
Churn
3Q’20 churn of 0.6%
Expected full year 2020 churn of 5-6%
Normalized FFO ($MM)
$0.91 $0.96Norm. FFO per diluted share
Adjusted EBITDA ($MM)
Notes:1. Recurring rent churn percentage is calculated as any reduction in recurring rent due to customer terminations, service reductions or net pricing decreases as a percentage of rent at the beginning of the period, excluding any
impact from metered power reimbursements or other usage-based billing.2. 3Q’19 churn excludes additional 0.4% impact of a customer exit associated with legal settlement and termination fee received during the quarter; recurring revenue from that lease has not been recognized since mid-2016.
3Q’20 Earnings Presentation 13
YEAR OVER YEAR P&L ANALYSIS
Revenue growth of 5% compared to 3Q’19
NOI up 4% over 3Q’19, driven by revenue growth
Adjusted EBITDA up 3% over 3Q’19, driven primarily by higher NOI
Increase in Normalized FFO due primarily to growth in Adjusted EBITDA and a decrease in interest expense
($MM) Three Months Ended Fav/(Unfav)3Q’20 3Q’19 $ %
Revenue $262.8 $250.9 $11.9 5%Property operating expenses 109.7 103.0 6.7 7%Net Operating Income (NOI) $153.1 $147.9 $5.2 4%NOI Margin 58.3% 58.9%
Selling, general & administrative(1) $25.1 $24.3 $0.8 3%Less: Stock-based compensation (4.2) (4.2) - -%Adjusted EBITDA $132.2 $127.8 $4.4 3%Adjusted EBITDA Margin 50.3% 50.9%
Normalized FFO $114.4 $103.9 $10.5 10%
Normalized FFO per diluted share(2) $0.96 $0.91 $0.05 5%
($MM) Three Months Ended4Q’19 1Q’20 2Q’20 3Q’20
Normalized FFO $113.7 $111.8 $118.9 $114.4Adjustments to Normalized FFO(3) (4.2) 1.1 (2.4) (6.9)AFFO $109.5 $112.9 $116.5 $107.5
Notes:1. Cash severance and management transition costs of $6.4MM, severance-related stock compensation costs of $2.6MM, and legal claim costs of $0.1MM in 3Q’20 are omitted from this presentation as they are excluded from
Adjusted EBITDA. Legal claim costs of $0.4MM and new accounting standards and regulatory compliance and the related system implementation costs of $0.2MM in 3Q’19 are omitted from this presentation as they are excluded from Adjusted EBITDA. See Adjusted EBITDA reconciliation on slide 21 for more information.
2. Weighted average diluted common shares for 3Q’20 and 3Q’19 were 119.2MM and 113.5MM, respectively.3. See reconciliation on slide 22 for more information.
3Q’20 Earnings Presentation 14
MARKET DIVERSIFICATION / PORTFOLIO OVERVIEW
Notes:1. Based on September 2020 annualized rent. Annualized rent represents cash rent, including metered power reimbursements, for the month of September, multiplied by 12.2. May not sum to total due to rounding.3. Leased percentage is calculated by dividing CSF under signed leases (whether or not the lease has commenced billing) by total CSF.4. Stabilized properties include data halls that have been in service for at least 24 months or are at least 85% leased.
As of September 30, 2020 As of September 30, 2019
MarketCSF Capacity Sq
Ft (000)(2) % Leased(3)CSF Capacity Sq
Ft (000)(2) % Leased(3)
Northern Virginia 1,166 93% 1,113 91%
Dallas 621 71% 621 71%
Phoenix 581 92% 509 100%
Cincinnati 402 73% 402 78%
San Antonio 367 96% 300 100%
Houston 308 62% 308 64%
New York Metro 290 79% 228 76%
Chicago 203 79% 203 73%
Austin 106 77% 106 81%
Raleigh-Durham 94 95% 83 100%
Total - Domestic 4,138 84% 3,872 84%
London 148 83% 128 81%
Frankfurt 144 99% 144 99%
Amsterdam 39 100% - -
Singapore 3 20% 3 22%
Total - International 334 91% 275 90%
Total - Portfolio 4,471 84% 4,148 85%
Stabilized Properties(4) 4,134 87% 3,935 88%
Balanced revenue contribution across markets with European expansion further enhancing
diversification of portfolio
13%
10%
8%
8%
7%
2%4%
4%
5%
3%
23%
13%Dallas
New York Metro
Cincinnati
NorthernVirginia
Phoenix
Houston
Chicago
San Antonio
Raleigh-Durham
AustinLondon
Frankfurt
Revenue(1) by Market
3Q’20 Earnings Presentation 15
DEVELOPMENT
MarketCSF Under
Development(1)Critical Load Capacity(2)
Under Development
San Antonio 67K 6 MW
New York Metro 54K 5 MW
Council Bluffs, IA 42K 5 MW
Phoenix - 6 MW
Total - Domestic 163K 22 MW
Frankfurt 124K 44 MW
Dublin 39K 6 MW
London 19K 6 MW
Total - International 182K 56 MW
Total - Portfolio 345K 78 MW
Notes:1. Represents CSF at a facility for which activities have commenced or are expected to commence in the next two quarters to prepare the space for its intended use. Estimates and timing are subject to change. May not sum to total
due to rounding.2. Represents aggregate power available for lease to and exclusive use by customers expressed in terms of megawatts. The capacity presented is for non-redundant megawatts, as CyrusOne can develop flexible solutions to our
customers at multiple resiliency levels.
Development Projects
Development projects expected to deliver 345K CSF and 78 MW of power across both domestic and international markets
− 321K square feet of powered shell under construction in Northern Virginia, Council Bluffs (IA), and Dublin
− For projects currently under development, 63% of CSF is contractually committed to customers
Estimated $258-341MM cost to complete
As of 9/30/20
More than 4.8MM CSF online upon completion of projects in current development pipeline, up 16% from 9/30/19
3Q’20 Earnings Presentation 16
$400MM SENIOR UNSECURED NOTES OFFERING
As a result of the notes offering, we have smoothed and extended our debt maturity schedule and increased our percentage of fixed-rate debt, while only modestly increasing our weighted average interest rate
Issued $400M of 2.150% senior notes due 2030, with the net proceeds used to repay $300 million of outstanding indebtedness under the unsecured term loan maturing in March 2023 and for general corporate purposes, including the repayment of a portion of amounts outstanding under the Company’s unsecured revolving credit facility
Increased the weighted average remaining debt term from 5.9 to 6.3 years and the percentage of fixed-rate debt from 65% to 77%, while the weighted average interest rate increased only eight basis points, from 2.05% to 2.13%
Debt Maturity Schedule as of 6/30/20($ Millions)
Key Credit MetricsWtd. avg. remaining term 5.9 yrsWtd. avg. interest rate 2.05%Fixed-rate debt %(1) 65%
Debt Maturity Schedule as of 9/30/20 ($ Millions)
$600 $1,050
$586 $600 $400
'20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30
Key Credit Metrics ChangeWtd. avg. remaining term 6.3 yrs +0.4 yrsWtd. avg. interest rate 2.13% +8 bpsFixed-rate debt %(1) 77% +12 pct pts
$600
$1,430
$562 $600
'20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30
New Notes
Note:1. Adjusted to reflect impact of floating-to-fixed interest rate swap.
3Q’20 Earnings Presentation 17
STRONG BALANCE SHEET
Net Debt(1) to LQA Adj. EBITDAEx. ASC
842
Key Credit Highlights
~$8.4BGross Asset Value(1)
5.1x
6.3Weighted Avg. Remaining Debt Term
years
Available Liquidity(3)
$1.71B100%
% Unsecured(4)
No debt maturities until Nov’24(2)
Capital Structure
ATM Equity
72%
26%
2%
Equity(5)
Net Debt(1)
Operating LeaseLiabilities
5.0x
Long-Term Debt
L-T DebtAmt.
($MM)Interest
RateMaturity
Date
Revolver - EUR(7) 140.7 E+100 bps Mar’25(2)
Revolver - GBP(8) 109.4 G+100 bps Mar’25(2)
Term loan(9)(10) 800.0 L+120 bps Mar’25(2)
USD senior notes 600.0 2.900% Nov’24
EUR senior notes(11) 586.2 1.450% Jan’27
USD senior notes 600.0 3.450% Nov’29
USD senior notes 400.0 2.150% Nov’30
Total(12) $3,236.3 2.13%(13)
17% vs. 9/30/19
Notes:1. Gross asset value is defined as total assets plus accumulated depreciation. Net debt is defined as long-term debt and finance lease liabilities, offset by cash and cash equivalents. In the Net Debt to LQA Adj. EBITDA calculation,
it has been further adjusted to reflect the pro forma settlement of the forward sale agreements. The estimated impact of the adoption of ASC 842 on adjusted EBITDA for the last quarter annualized is $15.8MM. Please refer to slide 23 of this presentation for reconciliation of Net debt.
2. Assuming exercise of 12-month extension option on revolving credit facility and exercise of two 12-month extension options on $100MM term loan tranche. 3. Includes cash, cash equivalents and temporary cash investments on hand plus undrawn capacity on the revolving credit facility plus the pro forma impact of the net proceeds from the settlement of the forward sale agreements. 4. Excludes finance lease liabilities of $29.2MM.5. Based on 9/30/20 closing price of $70.03.6. Settlement of 2Q’20 and 3Q’20 sales required by May 2021 and September 2021, respectively. No portion of these forward sale agreements has been settled as of October 28, 2020.7. EUR amount outstanding is USD-equivalent of €120MM. Interest rate based on EURIBOR. Interest rate as of 9/30/20: 1.00%.8. GBP amount outstanding is USD-equivalent of £85MM. Interest rate based on GBP LIBOR. Interest rate as of 9/30/20: 1.05%.9. $500MM of $800MM synthetically converted into €451MM pursuant to USD-EUR cross currency swap; $300MM swapped pursuant to USD floating to fixed interest rate swap. 10.Interest rate as of 9/30/20: 1.35%; weighted average interest rate pursuant to swaps: 1.38%.11.Amount outstanding is USD-equivalent of €500MM.12.Excludes adjustment for deferred financing costs and unamortized bond discounts.13.Weighted average interest rate calculated using lower interest rate on swapped amount.
SharesEst. Net
Proceeds
3Q’20 Forward Sales(6) ~3.0MM ~$219MM
2Q’20 Forward Sales(6) ~2.8MM ~$194MM
Total Forward Equity ~5.8MM ~$413MM
Equity to manage leverage in targeted range with forward equity to fund requirements
9/30 Value3Q’20 ADS Sales
$155MM
GDS Monetization
$13MM
3Q’20 Earnings Presentation 18
LEASE COMMENCEMENTS
Total Backlog - Estimated Annualized GAAP Revenue Commenced by End of Period ($MM) (excl. estimates of pass-through power)
$3.4
$10.7 $4.3
$1.6 $1.4
3Q'20 4Q'20 1Q'21 2Q'21 andThereafter
Total $-
$10
$20
3Q’20 Leases - Estimated Annualized GAAP Revenue Commenced by End of Period ($MM) (excl. estimates of pass-through power)
In 3Q’20, leased 4 MW and 15,000 CSF; weighted average lease term of 4.5years
Estimates on lease commencements for future quarters are based on current estimated installation timelines
Excluding estimates for pass-through power charges, leases signed during 3Q’20 represent approximately $11MM of annualized GAAP revenue
Total annualized GAAP revenue backlog of approximately $82MM as of the end of 3Q’20(1)
$28.7
$82.0
$14.2
$39.1
4Q'20 1Q'21 2Q'21 andThereafter
Total $-
$50
$100
Note:1. Annualized GAAP revenue commencing in 2Q’21 and thereafter includes ~$26MM associated with 22.5 MW expected to be deployed in 4.5 MW blocks annually from mid-2022 to mid-2026.
3Q’20 Earnings Presentation 19
REVISED 2020 GUIDANCE
Category ($MM except for Normalized FFO)
Previous 2020
Guidance
Current 2020
GuidanceTotal Revenue $1,010 - 1,045 $1,020 - 1,035
Lease and Other Revenues from Customers $865 - 890 $865 - 875
Metered Power Reimbursements $145 - 155 $155 - 160
Adjusted EBITDA $525 - 550 $535 - 540
Normalized FFO per diluted common share $3.75 - 3.90 $3.80 - 3.90
Capital Expenditures $850 - 950 $900 - 1,000
Development(1) $835 - 930 $885 - 980
Recurring $15 - 20 $15 - 20
Note:1. Development capital expenditures include the acquisition of land for future development.
3Q’20 Earnings Presentation
APPENDIX (NON-GAAP RECONCILIATIONS)
3Q’20 Earnings Presentation 21 21
Note:1. We calculate Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDAre) as GAAP Net income (loss) plus Interest expense, net, Income tax benefit, Depreciation and amortization expenses and
Impairment losses. While it is consistent with the definition of EBITDAre promulgated by the National Association of Real Estate Investment Trusts ("Nareit"), our computation of EBITDAre may differ from the methodology for calculating EBITDAre used by other REITs. Accordingly, our EBITDAre may not be comparable to others.
CyrusOne Inc.Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA
(Dollars in millions)(Unaudited)
LQA Three Months Ended3Q 2020 Sep. 30, 2020 Sep. 30, 2019
Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA:Net income (loss) $ (149.2) $ (37.3) $ 12.6
Interest expense, net 53.2 13.3 19.6 Income tax benefit (7.6) (1.9) (2.0) Depreciation and amortization expenses 452.4 113.1 105.4 Impairment losses and (gain) loss on disposal of assets 35.2 8.8 1.0EBITDA (Nareit definition)(1) $ 384.0 $ 96.0 $ 136.6
Transaction, acquisition, integration and other related expenses 6.4 1.6 4.4 Legal claim costs 0.4 0.1 0.4 Stock-based compensation expense 16.8 4.2 4.2 Cash severance and management transition costs 25.6 6.4 -Severance-related stock compensation costs 10.4 2.6 -Loss on early extinguishment of debt 12.4 3.1 -New accounting standards and regulatory compliance and the related system implementation costs - - 0.2
Gain on marketable equity investment (18.8) (4.7) (12.4)Foreign currency and derivative losses (gains), net 91.6 22.9 (5.5)Other expense (income) - - (0.1)Adjusted EBITDA $ 528.8 $ 132.2 $ 127.8
NON-GAAP RECONCILIATIONS
3Q’20 Earnings Presentation 22 22
Notes:1. Straight line rent adjustments: Represents the difference between revenue recognized on a straight line basis under GAAP over the term of the lease compared to the contractual rental payments. Lease agreements typically
include payments that escalate over the term of the contract or, to a lesser extent, a ramp period. 2. Deferred revenue, primarily installation revenue: Represents payments received from customers in excess of revenue recognized under GAAP. This primarily relates to specific customer-requested buildouts that CyrusOne
does not include in its basic data center design. The company charges customers up front for these buildouts rather than incorporating into rent and billing them over time. The cash payments for these buildouts are non-recurring, and may vary significantly from quarter to quarter, but revenue is amortized over the life of the lease.
CyrusOne Inc.Reconciliation of Net Income (Loss) to FFO, Normalized FFO and AFFO
(Dollars in millions)(Unaudited)
Three Months EndedSep. 30, 2020 June 30, 2020 March 31, 2020 Dec. 31, 2019 Sep. 30, 2019
Reconciliation of Net Income (Loss) to FFO and Normalized FFO:
Net income (loss) $ (37.3) $ 45.0 $ 14.7 $ (52.1) $ 12.6 Net income (loss) per diluted common share $ (0.32) $ 0.39 $ 0.13 $ (0.46) $ 0.11
Real estate depreciation and amortization 110.7 107.5 105.8 105.6 102.6 Impairment losses and (gain) loss on disposal of assets 8.8 2.4 (0.1) 0.1 1.0 Funds from Operations ("FFO") - Nareit defined $ 82.2 $ 154.9 $ 120.4 $ 53.6 $ 116.2
Loss on early extinguishment of debt 3.1 - 3.4 71.8 -Gain on marketable equity investment (4.7) (50.4) (14.7) (27.2) (12.4)Foreign currency and derivative losses (gains), net 22.9 13.9 (5.1) 13.0 (5.5)New accounting standards and regulatory compliance and the related system implementation costs - - - - 0.2
Amortization of tradenames 0.2 0.3 0.3 0.4 0.6 Transaction, acquisition, integration and other related expenses 1.6 0.1 0.5 2.3 4.4 Cash severance and management transition costs 6.4 - 6.8 (0.7) -Severance-related stock compensation costs 2.6 - 0.1 - -Legal claim costs 0.1 0.1 0.1 0.5 0.4 Normalized Funds from Operations (Normalized FFO) $ 114.4 $ 118.9 $ 111.8 $ 113.7 $ 103.9
Normalized FFO per diluted common share $ 0.96 $ 1.03 $ 0.97 $ 0.99 $ 0.91 Weighted average diluted common shares outstanding 119.2 115.7 115.1 114.4 113.5
Amortization of deferred financing costs and bond premium / discount 1.6 1.6 2.0 1.4 1.2 Stock-based compensation expense 4.2 3.4 3.5 4.3 4.2 Non-real estate depreciation and amortization 2.1 2.0 2.0 2.1 2.0 Straight-line rent adjustments(1) (6.6) (2.1) 1.7 (3.8) (5.9)Deferred revenue, primarily installation revenue(2) 0.2 2.3 (2.2) (2.3) (1.7) Leasing commissions (5.3) (3.2) (2.4) (4.8) (2.8)Recurring capital expenditures (3.1) (6.4) (3.5) (1.1) (4.5)Adjusted Funds From Operations (AFFO) $ 107.5 $ 116.5 $ 112.9 $ 109.5 $ 96.4
NON-GAAP RECONCILIATIONS
3Q’20 Earnings Presentation 23 23
CyrusOne Inc.Reconciliation of Net Income (Loss) to Net Operating Income
(Dollars in millions)(Unaudited)
Three Months EndedSeptember 30, 2020 September 30, 2019
Reconciliation of Net Income (Loss) to Net Operating Income (NOI)
Net income (loss) $ (37.3) $ 12.6 Sales and marketing expenses 4.5 5.1 General and administrative expenses 29.7 19.8 Depreciation and amortization expenses 113.1 105.4 Transaction, acquisition, integration and other related expenses 1.6 4.4 Interest expense, net 13.3 19.6Gain on marketable equity investment (4.7) (12.4)Loss on early extinguishment of debt 3.1 -Impairment losses 8.8 0.7 Foreign currency and derivative losses (gains), net 22.9 (5.5)Other (income) expense - 0.2Income tax benefit (1.9) (2.0)Net Operating Income $ 153.1 $ 147.9
CyrusOne Inc.Reconciliation of Net Debt
(Dollars in millions)(Unaudited)
September 30, 2020Long-term debt(a) 3,236.3Finance lease liabilities 29.2Less:
Cash and cash equivalents (156.5)Forward ATM sale net proceeds upon settlement by May 2021 (194.3)Forward ATM sale net proceeds upon settlement by September 2021 (218.7)
Net Debt including pro forma impact of forward ATM sale net proceeds 2,696.0(a)Excludes adjustment for deferred financing costs and unamortized bond discounts.
NON-GAAP RECONCILIATIONS
3Q’20 Earnings Presentation 24 24
The annual guidance provided in this presentation represents forward-looking statements, which are based on current economic conditions, internal assumptions about the Company’s existing customer base, and the supply and demand dynamics of the markets in which CyrusOne operates. The COVID-19 pandemic continues to evolve and the potential impact on our business remains uncertain and unpredictable.
CyrusOne does not provide forward-looking guidance for GAAP financial measures (other than Total Revenue and Capital Expenditures) or reconciliations for the non-GAAP financial measures included in the annual guidance provided due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including net income (loss) and adjustments that could be made for transaction, acquisition, integration and other related expenses, legal claim costs, impairment losses and loss on disposal of assets and other charges in its reconciliation of historic numbers, the amount of which, based on historical experience, could be significant.
2020 GUIDANCE